Estimated Quarterly Taxes
Estimated quarterly taxes are the four prepayments self-employed people, business owners, and others without enough withholding send the IRS during the year to cover income tax and self-employment tax as they earn it.
The IRS runs on a pay-as-you-go system. A W-2 employee handles it automatically through paycheck withholding; if you're self-employed or your income isn't fully withheld, you do it yourself with Form 1040-ES. You owe estimated payments for 2026 whenever you expect to be short by $1,000 or more after subtracting withholding and refundable credits. Below that, skip it.
The dates aren't evenly spaced, which trips people up every year. For the 2026 tax year, payments are due April 15, 2026, June 15, 2026, September 15, 2026, and January 15, 2027 — note the gap from the first to the second is only two months, and the last one lands in the following January. You can skip the January payment entirely if you file your full 2026 return and pay the balance by February 1, 2027.
Two ways to dodge the underpayment penalty. Pay in 90% of what you'll actually owe for 2026, or pay 100% of your 2025 tax bill. If your 2025 AGI topped $150,000 ($75,000 married filing separately), that second number climbs to 110%. The 110% prior-year route is the safe harbor most higher earners lean on, because it locks in protection from a number you already know. Hit it and the IRS can't penalize you, even if 2026 turns out to be a monster year and you owe far more in April.
Miss a payment and the penalty is really interest on the shortfall, charged from each due date until you pay. The rate resets quarterly: it was 7% for the first quarter of 2026 and 6% for the second. Because the clock runs per period, underpaying in April and squaring up in December doesn't erase the April penalty. The July 2025 tax law (OBBBA) reshuffled plenty of things, including QBI, the SALT cap, and bonus depreciation, but it left the estimated-tax framework alone; the thresholds and safe harbors above are the live 2026 rules.
Don't forget your state. Most states with an income tax run their own estimated-payment regime on similar dates, with their own thresholds and safe harbors. Budget for both, and if your income is lumpy, the annualized income installment method on Form 2210 lets you match payments to when you actually earned the money instead of paying in equal quarters.
Practical Example
Alex is a freelance consultant. In 2025 she earned $200,000 and owed $50,000 in total tax, and her 2025 AGI was above $150,000. To guarantee no underpayment penalty for 2026, she uses the prior-year safe harbor at the 110% rate: 110% of $50,000 is $55,000, split into four payments of $13,750 each, due April 15, June 15, and September 15, 2026, and January 15, 2027. Even if 2026 is her best year ever and she ultimately owes $70,000, she's penalty-proof because she paid in 110% of last year's tax; she simply settles the remaining balance when she files.